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Interactive Worksheet On The Accounts Of Clubs And Societies

This worksheet deals with:

• Terminology used in the accounts of clubs and societies
• Annual Subscriptions
• Life subscriptions
• Profit from 'side' activities
• Income and Expenditure accounts

After having completed the worksheet you should have a greater understanding of these issues and you should also be prepared for trying the objective assessment on the accounts of clubs and societies.

Terminology used in the accounts of clubs and societies

The essential characteristic of a 'club' or 'society' in this context is that they do not exist with the primary purpose of making a profit. Such entities normally exist with the primary purpose of furthering the interests of its members (for example, chess clubs exist to allow chess players to play).

Because of this the usual phrases associated with the profit-making sector are replaced:

* It is common for clubs to have side-activities (such as a bar). Such activities can make a 'profit' but this is added to the overall club 'surplus' in the Income and Expenditure account.

Subscriptions ('subs')

a. Annual subscriptions

a. i) annual subscriptions and the income and expenditure account

Club members normally pay annual subscriptions (membership fees). This represents an income and is credited to the income and Expenditure account ('I & E a/c').

Because the I & E a/c is effectively the P & L a/c, you need to use the accruals concept when calculating subs due for the year. You will normally be told the amount received. To calculate the subs figure for the I & E a/c there can be as many as four possible adjustments:

Imagine the following:

One more time....

a. ii) annual subscriptions and the balance sheet

At the year-end it is quite likely that a club will have some subs owing and subs paid in advance.

b. Life subscriptions

Some clubs give members the option of a single payment for life. It is important to realise that the income from this payment is designed to 'cover' many years. Under the accruals concept, we cannot credit the I and E a/c (for any one year) with the full amount. Instead the subscription is normally 'capitalised' (entered on the balance sheet at its full value as an addition to the accumulated fund) and it is gradually transferred to each years' I and E a/c at a pre-determined rate. The pre-determined rate will depend on factors such as the average age upon membership, the life expectancy of members, and of course the life membership fee itself.

Example:

Mr H paid £1000 life subscription in year 1. Life subs are transferred to 'I and E' over 20 years.

Profit from 'side' activities

Example: The 'Chisholm Light Aircraft Enthusiasts' operate a bar, details of which are as follows:

We will calculate the bar profit to be transferred to the income and expenditure account:

The bar profit will be transferred to the Income and Expenditure Account. A profit will be entered on the 'income' side whereas a loss will appear on the expenditure side.

Income and Expenditure Accounts

When preparing the 'I and E a/c' use the same principles as when preparing a Profit and Loss account. So:

• Bear in mind the accruals concept (i.e. enter expenditure incurred rather than that paid for, and enter income earned rather than that received)
• Don't include capital expenditure (such as fixed assets bought or loans repaid)

But DO include revenue expenditure such as:

• loan interest
• depreciation on fixed assets
• repairs to fixed assets

Why not now attempt the objective assessment on the accounts of clubs and societies?